AR Management in Healthcare: Meaning, Challenges, Strategies, and More 

Delayed revenue collections have now become common in healthcare operations, and we cannot overlook the significant cash flow problems they cause. This can be due to the huge volume of claims involved in medical accounts receivable (AR).

In such a scenario, a big question is—how can healthcare providers improve AR or accounts receivable management?

If you too are searching for an answer to this, you are certainly landed in the right place. Here, we will discuss everything about accounts receivable in healthcare, right from its meaning and importance to the current trends you must be aware of.

Let us dive in!

What are Accounts Receivable (AR)?

AR or accounts receivable in healthcare, simply means, the total outstanding money owed to the healthcare organization or practice for services rendered to patients.

The longer the AR remains unpaid, the lesser are the chances for the healthcare professional to get fully paid.

However, even though it indicates the amount owed, AR is considered an asset. Typically, providers classify their accounts receivables based on ages usually in 30 days bracket:

1-30 days

31-60 days

61-90 days

91-120 days

In case the reimbursement is not collected in time, this extends the AR cycle and possibly results in revenue leakage risk.

Efficiently managing accounts receivable process ensures consistent cash flow for continued operations.

Jump to the next section to understand more about the importance of accounts receivable in healthcare.

Importance of Accounts Receivable in Healthcare

The landscape of healthcare billing is undoubtedly complex. With several insurance plans and reimbursement models existing, a well-managed AR process has become a necessity to ensure timely and accurate collection of payments.

An efficient AR workflow enhances patient satisfaction since it gives clear, timely, and accurate information about their bills, which in turn builds a sense of trust and loyalty.

Here are more reasons why a seamless AR management is important:

Top 3 Challenges with Accounts Receivable Management

Let us now talk about the top three challenges in the landscape of accounts receivable in healthcare:

Complicated Billing & Reimbursement

Billing and reimbursement in the healthcare sector are multifaceted. From insurers and governmental companies to third-party payers, several parties are involved in the process. Specific needs, billing codes and documentation standards of each payer often result in errors and delays in processing claims.

Anyone who wants to navigate through these challenges requires a high degree of experience and manpower, often leading to the need for specialized staff to manage the AR effectively.

Also, regulations and guidelines within healthcare are subject to constant changes. This, in turn, also makes it necessary for healthcare organizations to stay abreast of all compliance updates.

Without adherence to such changes, denials and delays in payments can greatly impact the cash flow within the organization.

Administrative Burden

Accounts receivable in healthcare involves a lot of administrative tasks, from tracking the status of claims submitted and managing denials to payment collections.

Healthcare providers timely follow-up with payers to resolve any issue that may occur during the reimbursement process.

Furthermore, managing patient billing and handling inquiries regarding bills require so much time and resources. As a result, physicians and staff often find themselves juggling with admin tasks instead of focusing on quality patient care. This not just leads to overall stress but also negatively impacts the overall quality of healthcare services.

Rising Patient Responsibility

Shifting to high-deductible health plans has greatly increased the patients’ financial responsibilities.

While deductibles and co-payments increase, patients have no other option but to bear a larger share of their healthcare costs. Due to the same reason, health providers do not usually experience an easy time in collecting direct payments from their patients.

In short, the rising patient responsibility leads to more unpaid or delayed balances, thereby impacting the organization’s revenue cycle and cash flow alike.

How to Improve Accounts Receivable Management in Healthcare?

One can easily address the aforementioned challenges and optimize accounts receivable management in healthcare with the following strategies:

Streamlined Billing Processes

Bill procedures need to be simplified and standardized to minimize errors and enhance efficiency. Also, it is important for providers to ensure accurate coding, timely completion of documentation, and submission of claims to insurance companies or payers.

Clear and Transparent Patient Communication

The patient must be clearly informed about the billing policies, payment expectations, and financial responsibilities. Providers need to explain to them what each billing statement represents and provide various options for paying bills on time.

Timely Follow-Up

There must be a follow-up mechanism for unpaid claims or outstanding balances. Most importantly, providers must ensure denials, rejections, and appeals are followed up on time. Timely and persistent follow-up accelerates the receipts of payments.

Proactive Denial Prevention

There is a need to identify the most frequent patterns of denials and proactively prevent them. It is equally important to study the trends of denials, make necessary changes in billing practices to reduce denials.

Revenue Cycle Management (RCM)

The smartest strategy to ease the process is outsourcing RCM to specialized companies that are trained to manage accounts receivable. They are proficient in submitting clean claims, managing denials, and underpayments. This, in turn, enables the healthcare professionals to focus on patients.

Educate and Train Staff

Timely training for the staff on best practices, code requirements, and billing regulations is important to ensuring efficient AR workflow. Continuous education and training help in the attainment of high levels of accuracy and improvement of the overall accounts receivable management.

Trends and Predictions of AR Management in Healthcare

Now that you know everything about accounts receivable management in healthcare, from its meaning to process improvement strategies, it is now time to explore some trends and predictions of AR management in healthcare:

Artificial Intelligence in AR Management

Advanced technology solutions are increasingly being adopted by healthcare providers to automate their accounts receivable management process.

Machine learning, artificial intelligence, and robotic process automation now allow quick claims processing, accurate coding, and real-time verification of eligibility, hence cutting down administrative burden and increasing efficiency of the revenue cycle.

For example, at Jindal Healthcare, we use our patented AI-based tool, HealthX, which analyzes a practice’s financial performance and optimizes its revenue cycle processes. This, in turn, helps in reducing errors in medical billing and coding, prioritizing claims, accelerating revenue generation, and minimizing denial rates.

Contactless Transactions

It is safe to say that contactless transactions are revolutionizing the payment segment in accounts receivable.

The biggest advantage of contactless transactions is the improved CX as it offers swift payment options.

Contactless transactions in AR will not only be a technological win but also a strategic decision to optimize financial processes in 2024, and thus, entailing increased trust in the payment ecosystem.

Data Analytics and Predictive Analytics

With the smart use of data analytics and predictive modeling, healthcare organizations can find trends, predict patterns of payment, and optimize revenue cycle performance. Providers can analyze their own historical data and patterns in order to smoothen their processes of AR, reduce denials, and resolve issues proactively.

Advanced algorithms can, in fact, analyze payer behavior, seasonal variations, and patient demographics to develop customized strategies for every account.

Such technologies are rapidly advancing, promising a sea change in AR management from a reactive to proactive discipline.

Telehealth Impact

Telehealth is no longer a new norm in AR management. As virtual visits become an integral part of the healthcare delivery model, new challenges and opportunities arise for providers around billing and reimbursement.

AR teams need to adjust their processes to fit in with the unique elements of telehealth including variation in reimbursement rates for virtual services, state-specific regulations, and the complexities of cross-state licensing.

AR managers also must keep abreast of changes in the payer policy related to delivery methods that are usually different from traditional policies for in-person visits.

Revenue Cycle Management Partnerships

The healthcare providers are considering outsourcing AR management operations and creating strategic partnerships with specialized revenue cycle management firms.

This enables healthcare providers to access the latest technology, specialized skills, and economies of scale that are otherwise difficult to achieve if operated in-house.

By outsourcing complex AR functions, they can easily steer their focus and resources back to the primary goal, i.e., patient care. Many RCM firms also invest heavily in compliance and security measures that help providers navigate the complex regulatory landscape of healthcare finance.